Citi Near Term Stock Forecast: 9300 In The DJIA; 985 In The S&P; Sees Chart Analogs To Pre-World War Periods

Earlier today we presented one of the 12 forecasts by Citi’s FX Technical group which saw gold reversing recent drops, and soaring to $2400 by H2 2012 and far higher later on. Naturally, one argument is that this is simply Citi talking their books, and that one should be short when a bank is pitching a long. Of course, that is a valid interpretation. On the other hand, it is also possible that the recommendation is nothing less than a contextual recommendation of the what the big picture would look like if the bankers’ grand plan falls into place. And the plan is simple, and has been discussed extensively before here: namely, to push the market to that critical triple digit threshold at which point Congress and the population (most certainly including the “99” which just happen to have 401(k) and other pension funds) will beg Bernanke to print. However, the traditional resistance has been the market discounting precisely this, and refusing to sell knowing that when the market drops, it will eventually rise: a traditional Catch 22. Which is why stocks in the US have lagged the correction in China and Europe for as long as they have – this has not been a decoupling as is widely misunderstood; what it has been is a delayed realization that Bernanke will not print until market discounting fails, and stocks flush. Then and only then will “salvation” come from Saint Ben. Which is actually precisely what Citi is preaching. In the next two charts, we see its recommendations for the Dow Jones Industrial Average and the S&P, as dropping to 9300 and upper 900s in the S&P, at which point the Fed will have no choice but to intervene. It is in this context that the lift off of gold will take place, and where the previously stated targets of north of $2400 are quite feasible. Yet, ignoring the price of gold, it is Citi’s ultimate conclusion that is most disturbing: the bank finds eerie similarities in the current stock market formation with previous charts, both of which eventually led to World Wars…